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Global Perspective on Structural Labour Market Reforms in Europe

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  • Povilas Lastauskas

    (Faculty of Economics, University of Cambridge)

  • Julius Stakenas

    (Bank of Lithuania)

Abstract

Recent turbulent times have once again demonstrated how important flexible product and labour markets are to dampen the effects of adverse economic shocks. A number of labour market reforms have been implemented to enhance economic resilience and flexibility. However, accounting for the efficacy of policy interventions requires going beyond national boundaries and evaluating international interactions and global interdependencies, which may strengthen or weaken economic responses. Concentrating on open European economies, this paper deals with labour market institutions and structural reforms in a general equilibrium framework, which allows to analyse the intricate connections between labour policy choices and international trade (openness), paying special attention to labour market policy shocks. Amid discussions about a fiscal union in Europe, we empirically demonstrate that labour market policies can have positive and negative spillovers to trading partners, thereby calling for coordinated policies within a trading bloc. We answer three types of questions: what would have happened had all economies implemented structural labour market reforms simultaneously? How heterogeneous are responses in a single economy to shocks conducted in every other country? Relatedly, how heterogeneous are responses by all economies to a reform in one given economy?

Suggested Citation

  • Povilas Lastauskas & Julius Stakenas, 2015. "Global Perspective on Structural Labour Market Reforms in Europe," Bank of Lithuania Working Paper Series 21, Bank of Lithuania.
    • Handle: RePEc:lie:wpaper:21
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    Cited by:

    1. Povilas Lastauskas & Julius Stakenas, 2016. "Openness and Structural Labour Market Reforms: Counterfactuals for Lithuania," Bank of Lithuania Discussion Paper Series 1, Bank of Lithuania.

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    More about this item

    Keywords

    Labour structural reforms; global VAR; regional integration; spillovers;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models
    • E24 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Employment; Unemployment; Wages; Intergenerational Income Distribution; Aggregate Human Capital; Aggregate Labor Productivity
    • F12 - International Economics - - Trade - - - Models of Trade with Imperfect Competition and Scale Economies; Fragmentation
    • F16 - International Economics - - Trade - - - Trade and Labor Market Interactions

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